March Retail Sales Down 0.3% After February Sales Revised Up 0.2%

seasonally adjusted retail sales fell 0.3% in March after retail sales for February were revised 0.2% higher....the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $446.9 billion for the month, which was a decrease of 0.3 percent (±0.5%)* from February's revised sales of $447.9 billion but 2.8 percent (±0.8%) above the adjusted sales of March of last year...February's seasonally adjusted sales were revised from the $447.3 billion originally reported to $448.243 billion, while January's sales, which were revised down to $448.0 billion from the originally reported $449.9 billion last month, were revised higher from there, to $448,114 million with this report....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 11.3%, from $412,328 million in February to $459,015 in March, while they were up 3.6% from the $442,876 million of sales in March a year ago, so we can see that there was a major seasonal adjustment to turn those headline March sales negative....

since you're all familiar with the table from this report showing retail sales by business type that we've been including with this report for the past 3 years, we'll again post a copy of it here...to once again explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2016 r" (revised) and the February 2015 to February 2016 percentage change as revised in the 2nd column of the pair...for your reference, our copy of this same table from last month’s advance February estimates, before this month's revisions, is here.... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of a year ago....

from looking at this table, it's clear that the 2.1% decrease to $97,658 million in seasonally adjusted sales at automobile and parts dealers was responsible for the headline March sales decrease; without that nominal drop in automotive sales, other retail sales increased by 0.2% to $354,434 million...on the other hand, 0.9% higher sales at gasoline stations were a boost to the aggregate, probably just due to higher gas prices, without which such sales we would have seen retail sales down 0.4%...meanwhile, the only retailers showing large increases in March sales were building material and garden supply stores, where sales rose 1.4% to $30,240 million, and drug stores, where sales were up 1.0% to $27,407 million...at the same time, sales at clothing stores fell 0.9% to $21,140 million, and sales at bars and restaurants fell 0.8% to $53,750 million..

Consumer Prices Up 0.1% in March, Reducing March PCE

consumer prices for energy and most services were higher in March, while prices for most foods groups and other goods were lower, resulting in an incremental increase in the CPI for the first time since November....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in March after falling by 0.2% in February and after they had been unchanged in January and fallen 0.1% in December...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 237.111 in February to 238.132 in March, which left it statistically 0.85% higher than the 236.119 index reading of last March....regionally, prices for urban consumers have risen 1.5% in the West, 0.7% in the South, 0.5% in the Midwest, and 0.6% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people, except for in the Midwest, where prices have been up 1.0% in nonmetropolitan cities of less than 50,000...with energy prices higher and food prices lower, seasonally adjusted core prices, which exclude food and energy, also rose by just 0.1% for the month, with the unadjusted core index rising from 245.680 to 246.358, which is now 2.2% ahead of its year ago reading of 241.067...

the seasonally adjusted energy price index rose by 0.9% in March after falling by 6.0% in January and by 2.8% in both December and January, and thus the energy index still remains 12.6% lower than it was in March a year ago....prices for energy commodities were 1.9% higher in March while the index for energy services saw a 0.2% increase, after increasing by 0.1% in February....the increase in the energy commodity index included a 2.2% increase in the price of gasoline, the largest component, and a 1.7% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.8% decrease…within energy services, the index for utility gas service fell by 0.7%, leaving utility gas priced 9.2% lower than it was a year ago, while the electricity price index rose by 0.4%, after falling by 0.2% in February...energy commodities are still priced 21.2% below their year ago levels, with gasoline 20.9% lower priced than it was a year ago, which doesn't even include the 18.7% one month drop in the gasoline index last January...meanwhile, the energy services price index is 3.3% lower than last March, as even electricity prices have fallen 1.7% over that period..

the seasonally adjusted food price index fell 0.2% in March, after it rose by 0.2% in February, as prices for food purchased for use at home fell 0.5% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.3% while average prices at full service restaurants rose 0.2%....for food at home, five of the six major grocery store food indexes were lower, with only the catch-all "other foods at home" showing a 0.4% increase on a 2.0% increase in butter prices, a 1.5% increase in prices for sauces and gravies and a 1.4% increase in prices for soups...a 1.9% drop in prices for fruits and vegetables led the price decrease in foods at home, as fresh vegetable prices fell 3.2% on a 7.2% drop in the price of tomatoes, and prices for fresh fruits other than apples, bananas and citrus were 1.7% lower...meanwhile, the price index for cereals and bakery products was down 0.6% as prices for flour and prepared flour mixes fell 1.9% and prices for breakfast cereal prices were 1.0% lower....at the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.5% as prices for eggs were 5.2% lower and poultry prices were 0.8% lower, more than offsetting a 0.7% increase in the price index for beef and veal...the index for dairy products was also 0.5% lower, as milk prices fell 1.3% and cheese prices fell 0.4% while ice cream prices rose 1.1%...lastly, the index for beverages and beverage materials was 0.3% lower as prices for roast coffee fell 1.7% and tea prices fell 1.2%, more than offsetting a 0.1% increase in prices for carbonated drinks...only two food line items have seen price changes greater than 10% over the past year; ham prices, which were down 0.9% in March, are 10.4% lower than they were in March a year ago, while apple prices are now 11% higher than last year, after rising 1.6% this month....the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1 in March after rising 0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.2% while the composite for all services less energy services was 0.2% higher....among the commodity components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2% on a 1.7% decrease in prices for appliances other than major appliances and a 1.8% decrease in prices for furniture not including bedroom, living room and kitchen furniture...apparel prices were 1.1% lower on a 7.9% decrease in prices for men's pants and shorts, a 3.0% decrease in prices for men's suits, sport coats, and outerwear, a 2.2% decrease in prices for infants' and toddlers' apparel, and a 3.7% decrease in prices for watches and jewelry, which were only partially offset by a 1.0% increase in prices for women's suits and separates...at the same time, prices for transportation commodities other than fuel were down 0.1%, as prices for new cars were down 0.2% while prices for tires fell 0.4%....on the other hand, prices for medical care commodities were 0.3% higher on 0.5% higher prescription drug prices, while the recreational commodities index was 0.3% lower as prices for TVs fell 2.4% and prices for recreational books were 4.9% lower...likewise, the education and communication commodities index was 0.5% lower on a 2.0% decrease in prices for computer software and accessories and a 0.7% decrease in prices for telephone hardware, calculators, and other consumer information items, while lastly the separate index for alcoholic beverages was unchanged despite an 0.8% drop in prices for wine at home, and the index for other goods rose 0.2% on a 0.5% increase in cigarette prices...

within services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.2% increase in owner's equivalent while costs for lodging away from home at hotels and motels fell 2.1%, and costs for water and sewerage maintenance were 0.5% higher....medical care services rose 0.1% as glasses and eye care services rose 0.4% while dental services fell 0.3%...at the same time, the transportation services index rose 0.2% on a 2.2% increase in car and truck rentals and a 1.6% increase in ship fares, while airline fares were 0.9% lower....meanwhile, the recreation services index rose 0.5% for the 2nd month in a row as admissions to movies, theaters, and concerts rose 2.3% and club dues and fees for participant sports and group exercises rose 0.9%... in addition, education and communication services were 0.1% higher on a 0.5% increase in delivery services and 0.3% higher elementary and high school tuition and fees......lastly, other personal services were up 0.2% on a 1.3% increase in the financial services index...among core prices, the 12.4% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 14.3% lower, and televisions, which are now 16.6% cheaper, saw their prices drop by more than 10% over the past year...

with this release, we can now attempt to estimate the economic impact of the retail sales report we covered earlier...for the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, March's clothing store sales, which fell by 0.9% in dollars, should be adjusted with the price index for apparel, which indicated prices were down by 1.1%, to show us that real retail sales of clothing were actually up 0.2% in March...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for the 3 months of the first quarter, January, February and March, with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually....the short cut we usually take to get a ballpark estimate of real sales is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales...those sales were down just about 0.25% in March, while their price index was down 0.3%, leaving real retail sales excluding food and energy sales still down by about 0.05%...then, for the rest of the retail aggregate, we find sales at grocery stores were unchanged in March, while prices for food at home were down 0.5%, suggesting a real increase of around 0.5% in the quantity of food purchased for the month...next, sales at bars and restaurants were down 0.8% in dollars, and moreover those dollars bought 0.2% less, so real sales at bars and restaurants were down about 1.0%...and while gas station sales were up 0.9%, gasoline prices were up 2.2%, suggesting a real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the details on that...weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in March were down slightly more than 0.1% from February…then looking at Tables 8 and 9 in the personal income and outlays report, we can see that real personal consumption expenditures of goods were at a 3,909.2 billion annual rate in February, already lower than the $3,917.9 billion annual rate of real personal consumption expenditures of goods in the 4th quarter...in very round numbers that would suggest March real personal consumption expenditures of goods, 0.1% lower than February's, would reduce 1st quarter GDP by roughly 0.08 percentage points...

the seasonally adjusted Producer Price Index (PPI) for final demand decreased by 0.1% in March as prices for finished wholesale goods rose by 0.2%, while margins of final services providers fell by the same amount...this followed a February report that showed the overall PPI had decreased 0.2%, with prices for finished goods down 0.6% while final demand for services was unchanged....producer prices thus remain 0.1% lower than a year ago, and 1.0% lower than two years ago, as the producer price index was down 0.9% over the span from March 2014 to March 2015, following the large crash of oil prices at the beginning of last year...

as we noted, the index for final demand for goods, aka 'finished goods', was up 0.2% in March after falling by 0.6% in February and by 0.7% in both January and in December, as the index for wholesale energy prices rose 1.8% on a 10.5% increase in wholesale prices for home heating oil and a 16.0% increase in wholesale prices for LP gas, which were partially offset by a 1.5% drop in gasoline prices....at the same time, the price index for wholesale foods was 0.9% lower on a 27.4% drop in wholesale prices of eggs for fresh use, reversing February's 28.9% egg price hike, and a 12.0% drop in wholesale price index for fresh and dried vegetables that followed a 19.0% drop the month before....excluding food and energy, the index for final demand for core wholesale goods rose by 0.1% in March, as a 1.5% drop in wholesale prices for industrial chemicals and a 1.1% decrease in prices for household appliances were offset by a 1.3% increase in wholesale prices for sporting and athletic goods and a 2.9% increase in wholesale prices for jewelry, platinum and karat gold..

meanwhile, the index for final demand for services fell 0.2% in March after being unchanged in February and rising by 0.5% in January, as the index for final demand for trade services fell 0.5%, the index for final demand for transportation and warehousing services fell 0.3%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.1% lower....noteworthy among trade services, seasonally adjusted margins for chemical wholesales were 6.9% lower and margins for fuels and lubricants retailers were 4.9% lower, while margins for book retailers were 2.5% higher...among transportation and warehousing services, margins for truck transportation of freight fell 0.7% and margins for rail transportation of freight fell 0.5% while margins for air transportation of freight were 1.3% higher...in the core final demand services index, margins for passenger car rentals fell 6.0% and margins for consumer loans were 2.2% lower..

this report also showed the price index for processed goods for intermediate demand fell by 0.2% after a 0.7% decrease in February, as intermediate processed goods prices have now been down 18 out of the last 20 months and remain 5.5% lower than in March a year ago.... the price index for processed foods and feeds fell 0.6%, while prices for intermediate energy goods were unchanged and the price index for processed goods for intermediate demand less food and energy was 0.1% lower...meanwhile, the price index for intermediate unprocessed goods was up 2.5% after falling 2.1% in February, in its first increase since June of last year...driving that increase was a 6.1% jump in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs was down 0.1%, and producer prices for raw materials other than food and energy materials was up 2.1% in only its second increase in nine months... this raw materials index remains 14.1% lower than it was a year ago, as most commodity prices remain depressed...

lastly, the price index for services for intermediate demand was 0.3% lower in March after it rose 0.3% in February, on a 1.1% decrease in the index for trade services for intermediate demand and a 0.2% decrease in the index for transportation and warehousing services for intermediate demand, while the core price index for services less trade, transportation, and warehousing for intermediate demand was unchanged...a 6.9% decrease in margins for intermediate chemicals and allied products wholesaling and a 2.4% drop in margins for intermediate business loans outweighed 1.3% higher margins for intermediate staffing services...over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative, remains 1.4% higher than it was a year ago...

Industrial Production Down 0.6% from February's Revised Level

two weeks before this week's release of the March report on Industrial production and Capacity Utilization, the Fed released the results of its annual benchmark revisions to the Industrial Production and Utilization data for the period covering January 1986 through February 2016, incorporating newly available annual data on output and prices...hence, this revision also changed the benchmark for all of the indexes, which had previously been set with 2012's level of activity equal to 100.0, and that means all of the previously published and reported on indexes now have a new benchmark, or basis...the net of all these revisions is that industrial production growth has been slower than previously reported, as it's now seen that total industrial production increased by an average of about 2 1/2 percent from 2011 through 2014 before falling roughly 1 1/2 percent in 2015...that also means that industrial production did not return to its pre-recession high until November 2014, six months later than previously estimated....below we're including a graphic of the revised index from Doug Short's coverage of this revision…

what's shown on the graph above is pretty obvious; industrial production figures as we've been reporting on them over the past year are shown in pink; the new industrial production index values, as of the benchmark revision, are shown in blue..as Doug's callout notes, the February's reported industrial production index had been down 1.47% from the previously published high in December 2014; it's now 2.34% below the level of November 2014, which now marks the new high....this current March release reports & in some cases revises all the new figures as if the old data had never been reported previously...

thus, starting from these newly published figures of two weeks ago, the March release on Industrial production indicated that industrial production fell by 0.6% for the second month in a row, after it had risen by 0.5% in January, which was revised from the 0.6% increase for January shown in the benchmark revision and the 0.8% increase for January published a month ago...February's 0.6% decrease was revised from the 0.5% decrease shown in both the benchmark revision and last month's report...the industrial production index, with the benchmark set for the revised average 2012 production to equal to 100.0, fell to 103.4 in March from in February, which was originally reported at 106.3 with last month's report...at the same time, the January index was revised from the revised reading of 104.7 to 104.6, and hence the industrial production index is now 2.0% lower than a year ago....to the extent that this report plays into GDP, the average index reading of 104.0 for the months of January, February and March is more than half a percent below the 104.6 index average for October, November and December, suggesting a noticeable negative impact on the 1st quarter GDP components that this index influences...

the manufacturing index, which accounts for more than 75% of the total IP index, fell by 0.3, from 103.4 in February to 103.1 in March, after the index for February was revised down from 103.6 to 103.4...that left the manufacturing index just 0.4% higher than a year earlier, largely because of the considerable downward revision in the annual revision.... meanwhile, the mining index, which includes oil and gas well drilling, fell to 103.9 in March from 107.0 in February, which was originally published as 108.1...the mining index has now been down 7 months in a row and is 12.9% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.2% from the already depressed level of February, dropping from 97.5 in February to 96.4 in March...with the utility index already depressed by a warmer than normal winter, it's now 7.7% below the level of last March, when demand for heating was closer to normal...

this report also gives us capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which were also extensively revised with the benchmark revision....after the revisions, seasonally adjusted capacity utilization for total industry fell from 75.3% in February to 74.8% in March; the previously published capacity utilization figure for February was 76.7%..capacity utilization for all manufacturing industries fell from 75.4% in February to 75.1% in March; utilization of NAICS durable goods production facilities fell from 76.0% in February to 75.5% in March, while capacity utilization for non-durables fell from 75.4% in February to 75.3% in March....capacity utilization for the mining sector fell to 73.7% in March from 75.6% in February, which was originally published as 77.5%, while utilities were also operating at 73.7% of capacity during March, down from the revised 74.6% of capacity during February...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

February Business Inventories Down 0.1%; Real Growth Still at a Pace Greater than 4th Quarter

following the release of the retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for February (pdf), which incorporates the revised February retail data and previously published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month...according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,284.4 billion in February, down 0.4 percent (±0.2%) from January's revised sales, and down 1.4 percent (±0.4%) from February sales of a year earlier...note that total January sales were also revised down by more than 0.5%, from $1,296.2 billion to $1,289.5 billion....manufacturer's sales fell by 0.7% from January to $462,807 million in February, while retail trade sales, which exclude restaurant & bar sales from the revised February retail sales we reported earlier, fell 0.2% to $394,050 million, and wholesale sales fell 0.2% to $427,560 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,812.1 billion at the end of February, down 0.1 percent (±0.1%)* from January, but 1.2 percent (±0.5%) higher than in February a year earlier...the value of end of January inventories was revised up by less than 0.1%, from the $1,812.3 billion reported last month to $1,813,781 million with this report...seasonally adjusted inventories of manufacturers were estimated to be valued at $634,282 million, 0.4% lower than in January, inventories of retailers were valued at $594,470 million, 0.6% greater than January, while inventories of wholesalers were estimated to be valued at $583,346 million at the end of February, down 0.5% from January...

before the change to inventories are included in GDP data, they must first be adjusted any changes in price to determine the real change in inventories...all the price changes used to adjust inventories come from the various components of the producer price index, even those of retail, which are valued as finished goods...last week we looked at both factory inventories and wholesale inventories, in light of 0.7% lower finished goods prices for January, 0.6% lower finished goods prices for February, 1.2% lower intermediate goods prices for January, and 0.7% lower finished goods prices for February, and judged that real inventories for both were up, with wholesale inventories possibly adding incrementally to 1st quarter GDP....the value of retail inventories, up 0.4% in January and 0.6% in February, would be adjusted with finished goods for those months, suggesting a 1.1% real increase in January retail inventories, followed by a 1.2% increase in real February inventories...that follows nominal inventory increases of 0.1%, 0.2%, and 0.2% for October, November, and December respectively, which would have been adjusted with finished goods producer price index decreases of 0.3%, 0.1% and 0.6% for those same months, resulting in real retail inventory growth at 0.4%, 0.3%, and 0.8% for those months of the 4th quarter...that suggests real inventories have been growing at a faster pace through January and February than they were in the 4th quarter, which would thus a;so boost 1st quarter GDP...that insight comes with the caveat that the Atlanta Fed's GDPNow model still projects that inventories will subtract 0.65 percentage points from 1st quarter GDP...

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....